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 Form 4 Business Studies online lessons on public finance

The purpose of public finance

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Answer Text:
Purpose of public finance
i. Provision of essential goods and services. The government has a responsibility of providing its citizens with essential goods and services such as security,health,schools,drought control, law e.t.c such facilities and services may not be adequately covered by the private sector because of
the high costs involved and risks.
ii. Encouraging consumption of certain commodities-The government may encourage consumption of certain commodities e.g. maize by subsidizing on their productions or lowering their taxes.
iii. Controlling consumption of certain commodities-The government may also encourage consumption of some commodities e.g. cigarettes and alcohol by imposing heavy taxes on them.
iv. Wealth Redistribution-This is done by heavily taxing the rich and using the money raised to provide goods and services that benefit the poor
v. To raise government revenue-Through public finance, the government raises revenue which it uses in provision of essential goods and services to the public.
Vi )Creation of a conducive Business Environment-Through public expenditure, the government may develop infrastructure such as roads, electricity, security
e.t.c thereby creating a conducive environment for businesses to thrive in.


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